Charlie Leocha, the Director of the Consumer Travel Alliance was invited by the Senate Committee on Commerce, Science and Transportation to testify about the proposed merger of Continental and United Airlines. Here is his oral statement made before the committee. (more…)

An interesting dynamic has emerged in Congress with discussions about airline alliances, The House Transportation and Infrastructure Committee is staunchly against such antitrust immunity and the Senate Commerce Science, & Transportation Committee is strongly in favor of these arrangements.
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Orignial published on Tripso.com

When the Department of Transportation (DOT), over the objections of the Department of Justice (DOJ), approved the Continental/United Airlines antitrust immunity deal this wasn’t included. DOT needs to take another look, now.

These two airlines have announced that they are building a new common IT platform that will serve as the backbone of their joint operations. This is the kind of cooperation that Delta is now implementing with Northwest. But Delta had to merge with Northwest before starting such integration.

Continental and United are attempting to take this merger-like step outside of a merger. They are using the antitrust immunity grant as a merger-in-fact agreement and are beginning to cooperate in ways never envisioned by the luminaries in the DOT alliance offices.

Unless these IT changes and cooperation are limited to international flights, Continental Airlines and United Airlines have a lot of explaining to do. They are simply breaking the law by cooperating intimately on on everyday domestic airline operations.

Domestic collusion is strictly forbidden in the antitrust immunity/airline alliance agreements that DOT allowed to go forward. United is pushing the envelope to see how far they can go before the administration reigns them in. Continental is probably going along since they are with a lame-duck CEO who is also interested in seeing how far airline can push the limits of the law.

Star Alliance, to which both Continental and United will belong, currently uses Amadeus to provide blended international IT services.

This IT cooperation according to Continental and United is only for international endeavors, but that is hard to believe. The algorithms and inside information to create a blended IT system goes far beyond the limited antitrust immunity currently in force.

Plus, the Amadeus platform, based in Europe, and dominate there, can serve any IT needs the airlines require for international interoperability.

DOT should take a close look at what Continental and United are tinkering with under the disguise of international antitrust immunity. This is a step too far.

Originally published on Tripso.com, June 30, 2009.

United Airlines by trying to foist credit card fees onto their agents is striking a blow against consumer protections offered by credit cards. Any way United slices their business, they are still, in the end, the service provider and should be liable to credit protections for services not rendered.

By shifting the credit card processing fees to travel agents, the credit card users will only have recourse against the agent should United fail to provide services. This newest United Airlines move to save themselves money comes at the expense of consumers across the country and their protection, not only at the cost of an additional three percent or so to travel agencies.

Janice Hough writing late last week in Tripso noted that additional problems will be created by adding a layer between the airline and the customer for everything from refunds and ticket changes to cancellations and mechanical problems.

This disconnect between the passenger and the airline (the client and the service provider) will have unintended consequences, should the airlines need refund airfares to make changes during a customer’s travels. Are the airlines now going to have to forward all necessary changes and credit card refunds back through the travel agent for approval? The paperwork and legal liability mess will be profound.

According to the Consumer Travel Alliance, a member of the Consumer Federation of America, even more worrying is the break between the airline and their customers from a contracting point of view and payment (consideration in legal terms). Should United, and other airlines, be allowed to force uncompensated agents to shoulder their credit card fees, legal experts will have to revise current contracts of carriage for these customers.

A situation will arise where passengers booked through travel agents, both brick and mortar and online travel agencies such as Expedia, Priceline, Travelocity, Orbitz and others have a different set of consumer protections and contract rights than those who book directly with United Airlines.

This United Airlines concept that has been “run up the flagpole” in order to test the ire it might create, is an ill-advised move by a flailing airline running out of ways to meet its cash demand requirements.

The Consumer Travel Alliance is writing to members of the House Committee on Financial Services and the Department of Transportation asking them to explore the ramifications of an action as that proposed by United on consumer protections and airline contracts of carriage.